Climate Change and SustainableEnergy Measures in RegionalTrade Agreements (RTAs)

By Markus W. Gehring, Marie-Claire Cordonier Segger, Fabiano de Andrade Correa, Patrick Reynaud, Alexandra Harrington and Rodrigo Mella

Issue Paper No. 3 Climate Change Architecture Series

Climate Change and Sustainable Energy Measures in Regional

Trade Agreements (RTAs)

An Overview

ICTSD

ICTSD Global Platform on Climate Change, Trade and Sustainable Energy

By Markus W. Gehring, Marie-Claire Cordonier Segger, Fabiano de Andrade Correa, Patrick Reynaud, Alexandra Harrington and Rodrigo Mella

Climate Change and Sustainable Energy Measures in Regional

Trade Agreements (RTAs)

An Overview

Issue Paper 3

ICTSD Global Platform on Climate Change, Trade and Sustainable Energy

Published by

International Centre for Trade and Sustainable Development (ICTSD) International Environment House 2

7 Chemin de Balexert, 1219 Geneva, Switzerland Tel: +41 22 917 8492 Fax: +41 22 917 8093 E-mail: ictsd@ictsd.ch Internet: www.ictsd.org Publisher and Director: Ricardo Meléndez-Ortiz Programme Manager: Ingrid Jegou

Programme Officer: Joachim Monkelbaan Acknowledgments

This paper is produced under ICTSD’s Global Platform on Climate Change, Trade and Sustainable Energy (Global Platform). ICTSD is grateful for the generous support to the Global Platform from ICTSD’s core and thematic donors including the UK Department for International Development (DFID); the Swedish International Development Cooperation Agency (SIDA); the Ministry of Foreign Affairs of Denmark (Danida); the Netherlands Directorate-General of Development Cooperation (DGIS); the Ministry for Foreign Affairs of Finland; The Ministry of Foreign Affairs of Norway. The Global Platform has also benefited from the support of the Inter American Development Bank (IADB); Oxfam Novib and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).

The concept of this paper has been informed by several ICTSD Dialogues, in particular a joint ICTSD- CISDL- Lauterpacht Centre-IDLO academic workshop entitled “Trade Law for the Low- Carbon Economy- New Means to Promote Trade in Climate-Friendly Goods and Services” in Cambridge, February 2012. The paper has benefitted from the review and comments by Professors Kibugi and Polanco, and by Thomas Brewer, Joachim Monkelbaan, Ricardo Meléndez-Ortiz and Ingrid Jegou of ICTSD.

ICTSD welcomes feedback on this document. These can be forwarded to Ingrid Jegou, ijegou@

ictsd.ch

For more information about ICTSD’s work on trade and climate change, visit our website: www.

ictsd.org

Citation: Gehring Markus W.; Marie-Claire Cordonier Segger; Fabiano de Andrade Correa; Patrick Reynaud; Alexandra Harrington and Rodrigo Mella; (2013); Climate Change and Sustainable Energy Measures in Regional Trade Agreements (RTAs): An Overview; ICTSD Programme on Global Economic Policy and Institutions; Issue Paper No. 3; International Centre for Trade and Sustainable Development, Geneva, Switzerland, www.ictsd.org

©Copyright ICTSD, 2013. Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged.

This work is licensed under the Creative Commons Attribution-Non-commercial-No-Derivative Works 3.0 License. To view a copy of this license, visit http://creativecommons.org/licenses/by- nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

The views expressed in this publication are those of the author and do not necessarily reflect the views of ICTSD or the funding institutions.

ISSN 2225-6679

TABLE OF CONTENTS

LIST OF ABBREVIATIONS AND ACRONYMS iv

FOREWORD v

EXECUTIVE SUMMARY 1

1. INTRODUCTION 2

1.1 Objective and Scope 2

1.2 Methodology 2

1.3 Structure 2

2. TRADE LAW FOR A LOW-CARBON ECONOMY: THE GLOBAL DEBATE 4 3. INNOVATION FROM DIVERSITY: DIFFERENCES IN REGIONAL

CONDITIONS AND APPROACHES 7

4. SUSTAINABLE ECONOMIC DEVELOPMENT PURPOSES OF RTAs 10 5. ‘WINDOWS’ FOR CLIMATE AND ENERGY MEASURES IN RTAs 12

5.1 Exceptions for Measures Related to Climate Change and

Sustainable Energy Mechanisms 12

5.2 Regulating Conflicts between RTAs and Climate/Energy Accords 15

5.3 Preventing Lower Investment Standards 15

6. ADDRESSING CLIMATE CHANGE COOPERATIVELY THROUGH RTAs 17

6.1 Strengthening Laws to Address Climate Change 17 6.2 Promoting Climate Finance Instruments and Carbon Markets 17

6.3 Promoting Climate-Change Technologies 18

6.4 Developing Climate Change Disaster Risk Reduction 19

7. SUSTAINABLE TRADE MECHANISMS IN RTAs 21

7.1 Enhancing Trade in Climate Friendly Goods and Services 21 7.2 Enhancing Trade in Sustainable Forest Products and Agriculture 22

7.3 Subsidies for the Low-Carbon Economy 23

7.4 International Standards for Clean Energy and Low-Carbon Development 24

INVESTMENT IN SUSTAINABLE ENERGY 26

ENDNOTES 29

ANNEX 39

ABBREVIATIONS AND ACRONYMS

APEC Asia-Pacific Economic Cooperation ASEAN Association of Southeast Asian Nations CARICOM Caribbean Community

CDM Clean Development Mechanism

CEC Commission for Environmental Cooperation

CITES Convention on International Trade of Endangered Species CTE Committee on Trade and Environment

DFQF Duty-free-quota-free EGS Environmental Goods and Services ER Environmental Review

EU European Union

FTA Free-trade Agreement

GATT General Agreement on Tariffs and Trade GHG Greenhouse Gas

MERCOSUR South-American Common Market (Mercado Común del Sur) NAAEC North American Agreement on Environmental Cooperation NAFTA North American Free Trade Agreement

NIA National Interest Assessment

OECD Organization of Economic Co-operation and Development PTA Preferential Trade Agreements

RTA Regional Trade Agreement

SEA Strategic Environmental Assessment SETA Sustainable Energy Trade Agreement SIA Sustainability Impact Assessment TBT Technical Barriers to Trade

TDCA Trade, Development and Cooperation Agreement UNCSD United Nations Conference on Sustainable Development UNFCCC United Nations Framework Convention on Climate Change WTO World Trade Organization

FOREWORD

Climate change has for years been on the political agenda. In the eddy of the UNFCCC debacle in Copenhagen in 2009, where world leaders failed to meet expectations and deliver a solution, it however inevitably slipped to the backburner of international policy priorities. Recently, attempts to change this have been made by several international frontrunners. For example, the head of the International Monetary Fund, Christine Lagarde, recently called for action when stressing that

“Unless we take action on climate change, future generations will be roasted, toasted, fried and grilled.” Jim Yong Kim, president of the World Bank, went so far as to state that “global warming imperils all of the development gains we have made.”

Also among those who need to take effective action to mitigate climate change, national governments, important changes in positions have been observed. In April 2013, the Least Developed Countries, a major negotiating bloc at the UNFCCC which has traditionally insisted that the primary responsibility for tackling climate change through carbon cuts lies with industrialised nations, stated that they agree to take on binding reduction commitments. While emissions form LDCs are negligible, this is nevertheless of major symbolic value, making it considerably more difficult for developed and emerging economies to avoid taking serious action while rather pointing to the other bloc to do more. Indeed, a month later, in May 2103, China indicated that it was considering a cap on carbon emissions starting in 2016. The US President Obama, who during his first term systematically avoided using the term climate change, has also come around to identifying concrete measures which he will undertake to address climate change.

These are encouraging signs indeed, the time for action is now, as underlined by a recent report from the International Energy Agency, which says that the world is currently not on track to meet the target of staying within a 2 degree target. Therefore, it is necessary to employ all policy measures and tools that are available to address carbon emissions. Among these tools, trade agreements present an interesting one. Where free and open trade allows for an optimal resource allocation, it should be pursued in the longer term. In the shorter term, expeditiously addressing specific obstacles to trade in climate-friendly goods and to renewable energy technologies, and providing for an enabling environment in the sector, is a concrete option which is increasingly within reach. Indeed, while progress to this end has staggered in the WTO under the Doha Development Round, countries are more and more making use of regional trade agreements, RTAs, to advance environment and climate objectives.

This paper, authored by a team of lawyers at the Centre for International Sustainable Development Law, with Cambridge Professor Markus Gehring as the lead author, offers an overview of a selection of recent RTAs. With specific examples based on recent treaty provisions, it analyses the most innovative attempts to form a new generation of RTAs to create different types of exemptions from trade rules that could otherwise restrict the adoption and implementation of domestic or international measures to address climate change; provide new mechanisms for cooperation on climate-change impacts and opportunities, including technology transfer; and enhance trade in climate-friendly goods and services, including use of trade and investment law to directly encourage the development of clean energy.

The findings of this paper can facilitate the identification of “low-hanging fruit” in upcoming multi- or plurilateral trade negotiations, for example under a “Sustainable Energy Trade Agreement”, SETA. It can also serve as inspiration for policy-makers as they negotiate new RTAs.

We are positive that this timely analysis will prove to be useful over the next few years as countries work together in the current momentum on environmental goods and services, including renewable energy technologies. Notable in this context is the recent agreement of the APEC-economies on a list of environmental goods for trade liberalisation, as well as encouraging movements among a group of like-minded countries to build on this by turning it into a full, binding trade agreement.

As always, we welcome comments and input on our paper.

Ricardo Meléndez-Ortiz Chief Executive, ICTSD

EXECUTIVE SUMMARY

This policy paper surveys the landscape of provisions related to climate change, including trade in sustainable energy technologies and services, in regional trade agreements (RTAs). It contributes to current analysis of the intersections between trade law and climate change, through a brief legal overview of climate and energy-related provisions in RTAs. It focuses on identifying potential

‘good practice’ examples that can inspire more comprehensive trade policy reform at multilateral or other levels, highlighting trade measures that, if implemented effectively, could lead to new opportunities for sustainable development of a low-carbon economy.

Carried out in partnership between the Centre for International Sustainable Development Law (CISDL) and the International Centre for Trade and Sustainable Development (ICTSD), with support from Canada’s academic Social Sciences and the Humanities Research Council (SSHRC) and the Jean Monnet Research Chair in Sustainable Development Law at the University of Ottawa Faculty of Law, the paper examines, in a comparative manner, provisions that have been adopted in recent RTAs to provide flexibility to regulators concerned about climate change, to enhance cooperation on trade-related climate change, and to encourage ‘climate-friendly’ trade and investment flows. Through this survey, the paper analyses the progressive development of the climate change and trade treaty agendas, drawing lessons for a sustainable energy trade agreement (SETA) that might harness trade in the interest of sustainable development.

To briefly summarise, this paper first examines the relationship between trade and climate change, highlighting the current regulatory challenges and conflicts that may pose significant obstacles to collaborative efforts to address climate change. Then, the paper explains how the obligations of member parties under the United Nations Framework Convention on Climate Change (UNFCCC) and the World Trade Organization (WTO) reflect mutual goals of sustainable development. It notes that multilateral efforts to implement these commitments continue to be difficult to realise. To address the questions raised, the paper provides a survey and analysis of the RTA landscape in 2012, briefly examining the main drivers of RTA negotiation. It concludes that measures to identify climate-change impacts and other sustainability concerns are now embedded in the preparatory and negotiations processes of some countries, and these methods and their significance are noted.

In particular, the paper argues that impact assessments are revealing key tensions between trade and climate change, not just in terms of the need to secure flexibility for regulators to reasonably address new climate threats and opportunities while avoiding disguised protectionism, but also to address the need for new cooperation to implement rather than undermine international and national climate-change objectives and the need to reduce subsidies and other incentives for trade and investment in obsolete goods and services, while enhancing trade and investment in lower-carbon technologies, goods and services that support sustainable development.

Further, the paper provides an overview of existing provisions in RTAs that address these tensions.

With specific examples based on recent treaty provisions, it analyses the most innovative attempts of the parties to form a new generation of RTAs to:

(1) create different types of exemptions from trade rules that could otherwise restrict the adoption and implementation of domestic or international measures to address climate change;

(2) provide new mechanisms for cooperation on climate-change impacts and opportunities, including technology transfer; and

(3) enhance trade in climate-friendly goods and services, including use of trade and investment law to directly encourage the development of clean energy.

1. INTRODUCTION

1.1 Objective and Scope

This paper examines the actual and potential role of trade in sustainable energy technologies and services provisions in regional trade agreements (RTAs) addressing climate change. It fills a gap in the current analysis of the intersections between trade law and climate change, by providing a brief but comprehensive legal overview of the state of play of climate-related provisions in RTAs.

It also analyses the current tensions between the progressive development of the climate change and trade treaty agendas. The broad purpose of this study is to identify both ‘low- hanging fruit’ for more comprehensive trade policy reform at the multilateral or plurilateral level and areas where further work is needed to implement new RTA measures to address climate change. Given that tariffs are already low in many countries and economic sectors, an examination of newer iterations of RTAs can help to identify provisions other than tariff reductions that can be included. For instance, the study reviews new mechanisms that have been included in recent RTAs to address non- trade barriers to effective transfer of clean energy technologies and other ‘climate- friendly’ trade and investment.

1.2 Methodology

This paper is based on a selection of findings from a broader legal research initiative led by legal scholars from the Law Faculty of McGill University and the Centre for International Sustainable Development Law (CISDL),¹ with support from Canada’s Social Sciences and Humanities Research Commission (SSHRC)² and the European Commission’s Jean Monnet Chair in Sustainable Development,³ in which more than 500 regional trade and investment agreements were classified into a database of relevant treaty texts. From the database, taking into account counsel from expert advisors and the outcomes of searches of existing law and policy literature, 58 RTAs were selected in which countries agreed

to commitments related to sustainable development. (See Annex). Not all of these RTAs, however, contained explicit innovations for sustainable development that merited further analysis. Further comparative scoping was conducted, using legal analytical methods, to identify the most substantive and explicit legal provisions related to climate change in the selected sampling of RTAs.

The qualitative comparative legal analysis permitted the identification of a subset of 26 RTAs for more detailed examination of textual treaty provisions, which most explicitly address substantive issues related to climate change. The RTAs selected were adopted and promulgated between the UN Conference on Environment and Development in 1992, and before the UN Conference on Sustainable Development in 2012, a 20-year period that encompasses the founding of the World Trade Organization (WTO), the adoption of the North American Free Trade Agreement (NAFTA), the development of the European Union’s (EU) new regional trade and economic partnership agreements under the Cotonou Agreement and the signature, entry into force and initial implementation of the UN Framework Convention on Climate Change (UNFCCC). Based on this comparative analysis, examples of innovative textual provisions from these treaties are provided where useful to illuminate the substantive legal points that are discussed throughout this paper. A table of the 59 RTAs surveyed and the 26 RTAs selected for more detailed analysis is provided in Annex 1.

1.3 Structure

The paper is introduced in Section 1, which explains the objective, scope, methodology and structure of the work. Then, in Section 2, the relationship between trade and climate change is briefly canvassed, highlighting the current regulatory challenges and conflicts that may pose significant obstacles to collaborative efforts to address climate change. It explains how the obligations of member parties under

the UNFCCC and the WTO reflect mutual goals of sustainable development, noting that efforts to implement these commitments continue to be difficult to realise.

Section 3 analyses changes in the RTAs landscape from 1992 to 2012, drawing from an agreed selection of RTAs that address sustainable development explicitly (See Annex 1). Measures to ensure the inclusion of climate change and other concerns are embedded into the preparatory and negotiations process in some countries, and these methods and their significance are noted. Section 4 then provides an overview of existing commitments in RTAs that set sustainable development as a purpose or principle of the RTA itself.

Section 5 summarises how RTAs are evolving to include provisions that create exemptions from trade rules that would otherwise restrict

the establishment and implementation of measures to address climate change by the parties to the RTAs, examining the nature of these provisions and their effects.

Sections 6, 7 and 8 then provide a deeper analysis of the more innovative cooperative provisions related specifically to addressing climate change and sustainable development of energy, considering both cooperative measures that directly address climate-change issues, as well as parties’ agreements to enhance trade in climate-friendly goods and services and otherwise use investment law to directly encourage clean energy and other low-carbon development. Finally, Section 9 provides recommendations, identifying potential options for progress either within future RTAs or in a stand-alone sustainable energy trade agreement (SETA).

2. TRADE LAW FOR A LOW-CARBON ECONOMY: THE GLOBAL DEBATE

International and national economic laws guide global and local efforts to prevent climate change and hold the potential to encourage

‘climate-friendly’ trade and investment in energy, transportation, forestry, agriculture and other sectors. Relevant regimes include international treaties, such as the UNFCCC and the agreements establishing the WTO, as well as a series of regional and bilateral trade and investment agreements. Despite an increasingly complex international framework, no clear and definitive rules have been established to govern the overlapping relationship between trade and climate change and to ensure that trade and investment can foster rather than frustrate the development of a low-carbon

‘green’ economy. Trade and climate-change linkages have appeared squarely on the agendas of three global negotiations processes with sustainable development goals: the UNFCCC, the WTO and the 2012 ‘Rio+20’ UN Conference on Sustainable Development, but all have been plagued by a continuing failure to make substantial progress.⁴

The more than 190 parties to the UNFCCC, in their national communications, have pledged to adopt new national strategies and laws, backed by new or tailored institutions, to address climate change.⁵ Indeed, countries, such as Mexico, the Philippines and the United Kingdom (UK), have recently passed domestic legislation creating regulatory frameworks for the implementation of key UNFCCC commitments regarding the creation of carbon-trading markets in a concerted effort to mitigate their respective contributions to greenhouse gas (GHG) emissions and to establish effective adaptation strategies.⁶ Many other countries are currently undertaking similar legislative and policy reform measures to more efficiently manage climate change in an economic framework.⁷ Evolving international economic regimes can significantly impact the effectiveness of these efforts, either fostering or frustrating the sustainable development of a low-carbon economy in the future.

Thus far, multilateral efforts to liberalise trade and investment and to reduce global GHG emissions have proceeded largely along separate tracks.⁸ On the one hand, trade liberalisation is being defined in the negotiations and the treaties establishing the WTO and their annexes together with over 3,000 regional and bilateral trade and investment treaties. Sustainable development, environmental and development considerations can be identified in various aspects of the WTO system. As has been well-documented, the Preamble of the WTO Agreement supports

“the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so.”⁹ More specifically, Articles XX (b) and XX (g) of the General Agreement on Tariffs and Trade (GATT) 1994 provide an avenue to take environment, health and other public law and policy considerations into account in trade dispute resolution by creating exceptions to restrictions on international trade for reasons of natural resources conservation and the protection of health and human, animal and plant life.¹⁰ It is possible that the WTO’s commitment to sustainable development as an objective would be interpreted to include climate- change considerations, particularly with respect to the use of the world’s atmosphere as a resource.¹¹ The WTO General Council’s Committee on Trade and Environment (CTE) has sought to clarify the relationship between trade and the environment so as to promote sustainable development and coordinate regulatory approaches to its management.¹² While its mandate has clear implications for climate change, progress to date has been limited, even for environmental goods and services liberalisation under the 2001 Doha Development Agenda negotiations.¹³

The other arm of the multilateral approach towards GHG reduction and mitigation is shaped by the UNFCCC. The UNFCCC establishes the

main international framework for a multilateral approach to climate-change mitigation.¹⁴ Article 3(5) of the UNFCCC requires parties to incorporate trade concerns into activities aimed at addressing climate change. The Kyoto Protocol, which entered into force in 2005 under the UNFCCC, sets binding commitments for developed country parties to reduce GHG outputs over a defined period.

Finally, the UNCSD – and most recently the Rio+20 meeting of the UNCSD – has affirmed that the promotion of sustainable development includes the advancement of the green economy, with strong governmental and civil-society impetus to incorporate the green economy into accepted economic models and practices at the domestic and international levels.¹⁵ The UNCSD has also established the importance of energy policy as a tool for advancement of indigenous and poor communities as well as the advancement of sustainable development and its many constituencies as a whole.¹⁶ This includes embracing the use of cleaner fossil fuels for energy generation as well as the use of new technologies.¹⁷

Though these systems of international policies and rules share common sustainable development objectives, the relationship between them is complex, as each focuses on particular facets of sustainable development.

Further, the regimes “are likely to come into closer contact as climate policies lead to significant economic effects.”¹⁸ To date, both the WTO and the UNFCCC have been careful to steer clear of any definitive statements on how interrelationships should be dealt with, and the lack of a dedicated and neutral forum to deal with the development and management of a trade and climate-change regime has remained a significant obstacle to the progression of this agenda. While echoing earlier encouragements for mutually supportive relationships, Rio+20 also failed to provide a definitive outcome.

Nevertheless, as has been noted by ICTSD and others, the intersection between these regimes poses genuine challenges and opportunities.¹⁹ International trade and investment treaty rules may affect the viability and effectiveness of

new regulations to address climate change.²⁰ For parties to the Kyoto Protocol, trade measures, such as eco-labelling, carbon taxes, export bans and restrictions, emissions trading schemes, border carbon adjustments and subsidies on low-carbon technology, can and should be included as mitigation measures likely to be undertaken in an effort to fulfill GHG-reduction commitments.²¹ Within the ambit of the Kyoto Protocol, this would have a direct correlation to the investment of a state in the reduction of carbon and other GHGs in practice by offering industry incentives to reduce GHG use and also by creating an educated public that is able to make environmentally informed choices. Such measures can also confer economic advantages or disadvantages for those subject to new domestic regulations or those that can access new international regimes.²²

New climate regulations, such as the attempt to include international and domestic air carriers under the carbon emissions rubric of the EU Emissions Trading System, may directly contradict key principles of WTO law, which prohibit arbitrary, unjustifiable or disguised restrictions on international trade and discrimination among like products due to process and production methods, and seek to lower technical barriers to trade (TBTs) in certain circumstances.²³ There is uncertainty as to whether the WTO Dispute Settlement Mechanism will choose a very strict interpretation of its provisions, finding trade restrictions undertaken for climate-change mitigation reasons to be in violation of WTO rules, or whether it will create a great area of leniency, for example deeming such provisions to be partially Article XX exceptions that are recognised under WTO treaty law.²⁴

While new climate measures, including emissions regulations, might well restrict or constrain certain types of economic activity, they can also provide incentives for more sustainable development. The transition to a green economy, it has been persuasively argued, offers important potential benefits for developing countries.²⁵ This transition can be facilitated by the transfer of renewable energy technology, capacity building and

direct financing (including both investment and development assistance), that is offered through the global climate regime. Trade and investment disciplines can also play a positive role. For instance, reducing tariffs and other

barriers to trade in clean technology products and environmental goods and services can facilitate global efforts to develop a low- carbon economy, offering new entries into a fast-growing and lucrative industry.²⁶

3. INNOVATION FROM DIVERSITY: DIFFERENCES IN REGIONAL CONDITIONS AND APPROACHES

Rather than focusing on the traditional preferential trade agreements (PTAs) that were popular in the 1970s, this study focuses on a new era of RTAs that incorporate environmental and sustainable development considerations to varying degrees within their unique trade law frameworks.

Since the early 1990s, there has been a marked increase in RTAs.²⁷ An extensive literature examines whether RTAs can be considered ‘building blocks’ or ‘stumbling blocks’ to deeper WTO liberalisation,²⁸ but these debates are beyond the scope of this paper. Principal incentives for the negotiation of RTAs are often described in general terms, such as opening new markets, increasing economic growth, accessing cheaper imports and increasing foreign investment. This recognised, a diversity of regional conditions generates myriad priorities and opportunities, which in turn shape the RTA landscape.

Leading countries are now seeking to harness economic integration initiatives under RTAs in order to achieve other objectives that are not exclusively economic and to address regional concerns through cooperation that includes both trade and other related provisions. Other strategic incentives have also been relevant to new trade agreements, such as efforts to send a strong signal that a country is considered a priority economic partner (for example the US-Korea Free Trade Agreement and the US- Colombia Free Trade Agreement), the desire to build regional economies of scale as a counterweight to other regional economic powers (such as MERCOSUR), or efforts to avoid being excluded from a powerful economic bloc — such as the Central America Free Trade Agreement (CAFTA). Such considerations have also spurred the accord of certain RTAs.

Based on the analysis of recent regional accords, this paper reveals that, with respect to sustainable development, several distinct models now exist for RTAs. Narrow RTAs focus on the establishment of an economic

framework and the reduction of tariffs and trade barriers, often through a PTA or some other accord. Environmental or other considerations are usually excluded from these very specific economic agreements, and such models are not the focus of this study.

Broader models of RTAs, many negotiated more recently, tend to include provisions on further issues, such as investment, labour standards or environmental protection. Such RTAs, often with labour and environmental chapters or side agreements, establish mechanisms or institutions responsible for monitoring and enforcing environmental standards, assisting with environmental data collection and legislative reform and dealing with complaints.²⁹ For instance, NAFTA is formulated as a straight free-trade agreement (FTA), but it also establishes separate side-agreements to deal with environmental and labour concerns. The North American Agreement on Environmental Cooperation (NAAEC), a separate side agreement to NAFTA, establishes the Commission for Environmental Cooperation (CEC) as its implementation body, which is responsible for information exchange on environmental issues, assessing environmental impacts of proposed projects and dealing with complaints from private individuals concerning non-implementation of environmental laws by NAFTA parties. This model of RTA, with attendant versions, is often used by Canada, Mexico and the United States (US)_when negotiating with other countries. Most recently, it was also used by Australia and Japan. It is notable, however, that even when side agreements do exist there are often also provisions within the associated RTAs that address environmental concerns and provide general exceptions to RTA provisions when there is a threat to the environment.

Even broader RTAs may also be formed in contemplation of regional economic integration objectives. For example, MERCOSUR in Latin America and the Economic Community of West African States (ECOWAS), despite having been formed with a view to encouraging trade

liberalisation in the regions, also tackle their member states’ shared concerns, such as the reduction of corruption and drug trafficking or legislative harmonisation. These RTAs focus on the formation of a common market, or an economic union, and progressively integrate their rules, often shaping collaborative agendas on different policy priorities as part of this process. Similar RTAs may be agreed as a means of promoting political dialogue and joint cooperation measures among the signatories, focused on ways to support sustainable development and related collaboration, with trade as simply part of the broader regional agreement. Such is the case in the EU partnership agreements with The Forum of the Caribbean Group of African, Caribbean and Pacific (ACP) States (CARIFORUM) , the Euro- Mediterranean Partnership and the different association agreements signed by the EU, which target various aspects of environmental and social development in the cooperation and trade chapters.

Though RTAs may vary extensively in content, focus and scope, they are all shaped by the priorities of states that are signatories, and certain trends can be noted as a result. The EU adheres to a sustainable development strategy, adopted in 2001 and revised in 2006, which seeks to promote sustainable development, requiring the EU’s internal and external policies to integrate environmental, social and economic decision-making.³⁰ In the US, the Trade Act of 2002 imposes a responsibility on the US to ensure that trade and environmental policies are mutually supportive and to seek to protect and preserve the environment and enhance the international means of doing so.

It also includes obligations to ensure that trade agreements do not weaken or reduce protection afforded in domestic environmental laws as an encouragement for trade and to include provisions on environmental protection.³¹ In this way, powerful economic actors, such as the EU and the US, may pre-condition RTA negotiations on the inclusion of sustainable development, labour, environment and other provisions, though the exact measures adopted in each treaty vary.

In recent years, states have also undertaken procedural innovations in the negotiation of RTAs. Various new procedures have been adopted to ensure that, while the momentum gained in negotiating the trade agreement is not lost, sustainable development considerations form part of the trade agreement.³² Successful RTA negotiations have, for instance, benefitted from the involvement of civil society and the promotion of high levels of transparency during the negotiation process. Facilitating public participation and consultation in negotiations has allowed stakeholders and even individual experts to influence the process. Such openness can help environmental or social concerns that may have been overlooked to be considered and addressed in the trade treaty. A further innovation in RTAs is the establishment of capacity-building mechanisms to support RTA negotiations and implementation. For instance, countries may be reluctant to accept new sustainable development and environmental responsibilities in RTAs, owing to fears that such obligations would impose burdensome financial and institutional requirements that they are incapable of providing. Capacity- building provisions thus establish institutional arrangements to train officials, advise on policy reform, assist in monitoring and enforcement of environmental provisions and usually include a funding mechanism to ensure financial support for such initiatives.³³ These procedural changes have secured the integration of environmental and social concerns into a trade and investment treaties.

Perhaps most relevant, many developed and developing countries now undertake ex-ante or ongoing environmental, developmental, human rights or sustainability impact assessments and reviews of trade liberalisation policies and draft treaties. In the US, Executive Order 13141, Environmental Review of Trade Agreements (November 1999) - later embodied in the Trade Act 2002 - and the Guidelines for Implementation of Executive Order 13141 (December 2000) establish the process for the assessment of environmental factors in the development of trade agreements by way of an environmental review. Similarly, in Canada, the 1999 Cabinet

Directive on the Environmental Assessment of Policy, Plan and Program Proposals and the 2001 Framework for Conducting Environmental Assessment of Trade Negotiations together require federal governments to undertake Strategic Environmental Assessments (SEAs) that analyse the environmental impacts of policy, plan and programme proposals and lay out the guidelines for doing so. The EU goes even further in what it terms its Sustainability Impact Assessments (SIAs). The SIA process is even more comprehensive in its analysis, as it also requires an examination of the social and economic aspects and impacts. All three programmes involve an initial scoping exercise, where all possible impacts and mitigation measures are considered, and all include a public consultation element, which allows members of the public to become involved in the process, including the scoping process, so that all possible effects and the opinions of the public are taken into account at an early stage.

Though not as thorough as EU and North American provisions, other countries also have similar measures in place to ensure that the impacts of trade measures are considered up front and inform the negotiation process. For example, New Zealand requires a National Interest

Assessment (NIA) for all treaties to which New Zealand may become a party. This assessment must consider environmental, economic, social and cultural impacts of the proposed treaty.³⁴ Japan’s Ministry of the Environment commissioned a study to investigate the environmental impact assessment methods that would be applied during Japan’s FTA negotiation process and bases its Guidelines on Environmental Impact Assessment of Economic Partnership Agreements and Free Trade Agreements in Japan on the results of this study.³⁵ Japan has also collaborated with Korea’s Ministry of Environment to conduct case studies on hypothetical trade agreements and in 2005 held a Joint Expert Seminar on Methods for the Assessment of Environmental Impacts by Free Trade Agreements in Japan.³⁶

Ultimately, the results of these assessments are useful, as they may assist negotiators to identify the areas where preventive, cooperative or enhancement initiatives could be useful to promote climate-change objectives in a trade or investment treaty. These assessments also have the potential to identify areas where domestic law and policy reform is needed and can help to shape the reforms by providing timely guidance.

4. SUSTAINABLE ECONOMIC DEVELOPMENT PURPOSES OF RTAs

In the 1987 Report of the World Commission on Environment and Development,³⁷ the 1992 Rio Declaration and Agenda 21,³⁸ and the 2002 Johannesburg Declaration and Plan of Implementation,³⁹ countries clearly recognised that trade and investment law has the potential to provide important contributions to sustainable development. Reflecting these assertions, parties to trade agreements and international investment agreements have begun to explicitly highlight their shared commitment to sustainable development as part of the object or purpose of the economic treaty. For example, the parties to the 1994 NAFTA jointly recognise the need to ‘promote sustainable development’ within the preamble of the treaty.⁴⁰ Even if not reflected in the operational provisions of the treaties, the incorporation of sustainable development concerns in preambles generally offers clues as to the object and purpose of the RTAs themselves, providing guidance to the parties, and any dispute settlement bodies, on how they might interpret the agreement in the event of a dispute.

For example, the RTAs entered into by the US and Canada subsequent to NAFTA incorporate similar assertions regarding the promotion of sustainable development. The Canada-Chile Free Trade Agreement,⁴¹ the Canada-Costa Rica Free Trade Agreement,⁴² the Canada- Peru Free Trade Agreement,⁴³ the Oman-US Free Trade Agreement, the US-Colombia Free Trade Agreement and the Chile-US Free Trade Agreement all enshrine commitments to pursue and support policies that promote sustainable development in environmental and natural resource management. The US-Australia Free Trade Agreement provides that parties will conduct their activities “in a manner consistent with their commitment to high labour standards, sustainable development, and environmental protection.”⁴⁴ The 2003 United States – Singapore Free Trade Agreement recognises that “economic development, social development, and environmental protection

are interdependent and mutually reinforcing components of sustainable development, and that an open and non-discriminatory multilateral trading system can play a major role in achieving sustainable development.”⁴⁵ Embracing the promotion of sustainable development as part of RTAs does not end with the NAFTA partners. For example, the EU–Chile Association Agreement goes further than many of the US and Canadian RTAs by requiring parties to implement their obligations in accordance with a “principle of sustainable development.”⁴⁶ The 2011 EU Association Agreement with Central America seeks to “harness globalisation in support of sustainable development” and

“ensure an appropriate balance between economic, social and environmental components in a sustainable development context.”⁴⁷ In a more integrated context, the parties to MERCOSUR’s treaty establishing the common market note in the preamble that

“the broadening of the current dimensions of national markets through integration is a fundamental condition to accelerate economic development with social justice” and that

‘this objective must be achieved through more effective use of available resources, preserving the environment…”⁴⁸

Through RTAs between North and North, North and South and even South and South countries, sustainable development has been recognise as a key objective, not only in the abstract, but in the very arenas that most seek to encourage economic growth – investment and trade policy and law.⁴⁹ As discussed, the NAFTA preamble notes a joint resolve to promote sustainable development by the parties. This was also the first RTA to be accompanied by an environmental side agreement. The provisions of this side agreement declare the promotion of sustainable development “based on cooperation and mutually supportive environmental and economic policies” as one of its main objectives.⁵⁰ Subsequent RTAs have followed suit, either with side agreements or with chapters and provisions relating to the environment and

sustainability that are integrated into the text of the regional economic accord itself. In the Canada-Peru FTA, at Chapter 17, the parties pledge to “recognize the mutual supportiveness between trade and environment policies and the need to do so in a manner consistent with environmental protection and conservation and the sustainable use of their resources.”⁵¹ In the EU-Columbia-Peru Agreement, parties agree to

“promote international trade in such a way as to contribute to the objective of sustainable development” and recognize the benefit of considering environmental issues “as part of a global approach to trade and sustainable development.”⁵² The EU-Eastern and South African States (Interim) Economic Partnership Agreement (EU-ESA EPA) refers to the need to mainstream environmental issues into trade and development.⁵³

But, these general statements of intent, no matter their potential interpretive value, are not the ‘state of the art’ in RTAs. As will be discussed below, to operationalise these preambular and related declarations, many states have taken on further and more specific commitments. These include provisions for (1) ‘waivers or windows’ to avoid conflicts with climate change and other sustainable development related provisions, (2) deeper cooperation arrangements through specific provisions in side agreements and other chapters of RTAs, (3) actual enhancement of trade and investment in specific sectors of relevance to climate change, such as environmental goods and services, renewable energy, carbon markets, organic agriculture, sustainable transport and sustainably harvested forests.

These are explored in greater detail below.

5. ‘WINDOWS’ FOR CLIMATE AND ENERGY MEASURES IN RTAs

Over the past two decades, many observers have raised the concern that trade agreements might prevent or weaken the adoption and enforcement of legitimate measures for health, the environment and the conservation of natural resources.⁵⁴ To accommodate such policies, however, the WTO agreements and many RTAs contain provisions that establish exceptions, or ‘windows,’ in trade policy. Such exceptions may be particularly relevant for adaptation, mitigation and financing measures to respond to climate change in developing countries.

Climate change is a new challenge for many regulators, and new measures are required to respond, including measures to stimulate development of clean-energy technologies that provide alternative ways to meet growing energy demand without increasing emissions.

Without such ‘windows’ in trade and investment treaties, both real and perceived conflicts might arise, ‘chilling’ the new regulatory measures that are required. Carefully crafted exemptions from trade rules, such as Article XX of the 1994 GATT, can provide flexibility for regulators in signatory countries, providing guidance for countries that are evaluating or developing regulations that might affect trade.

In essence, such ‘windows’ send the signal that trade disciplines will not be applied in certain situations, where they might constrain regulators and policymakers from adopting or applying measures to address – among others – health, environment and natural resources challenges related to climate change. This section discusses existing windows and their impact on trade agreements.

5.1 Exceptions for Measures Related to Climate Change and Sustainable Energy Mechanisms

In many regional trade and investment agreements, states have adopted general exceptions similar to those in the WTO Agreement, though with distinct wording. Such exceptions are provided for measures related to

the conservation of exhaustible living and non- living natural resources and the use of measures, including environmental measures, necessary to protect human, animal, or plant life or health.

Such 1994 GATT Article XX-style ‘general exceptions’ are now common in many RTAs,⁵⁵ but these RTAs also go further. For instance, the EU – Korea Free Trade Agreement, signed on 6 October 2010, and provisionally applied since 1 July 2011, provides both a general exception and further specific exceptions. Similar to other modern RTAs, Article 2.15 simply directly notes the parties’ reliance on Article XX of the 1994 GATT. However, further ‘windows’ are found throughout the agreement. At Article 6.1(g), the parties indicate that measures taken pursuant to the agreement for trade facilitation “shall not prejudice the fulfilment of legitimate policy objectives, such as the protection of national security, health and the environment.”⁵⁶ At Article 7.50, similarly, parties are permitted to take non-discriminatory measures to protect

“human, animal or plant life or health,” as well as natural resources, or national treasures and artistic objects. Similarly, as mentioned above the Central America – Dominican Republic Free Trade Agreement of 16 April 1998 adopts 1994 GATT-style general exceptions, but alongside, at Article 10.07 on Services, further environmental exceptions are provided. Along the same lines, in Article 13.13 on TBTs, there are specific exceptions for hazardous waste and the environment.

A more comprehensive approach was adopted by the parties to the EU-Colombia-Peru Trade Agreement, which was signed on 26 June 2012.

Article 275 of this RTA explicitly addresses climate change. Starting with a commitment, the parties indicate their resolve “to enhance their efforts regarding climate change, which are led by developed countries, including through the promotion of domestic policies and suitable international initiatives to mitigate and to adapt to climate change.”⁵⁷ Then, highlighting the need for a rapid transition to a low-carbon economy, the parties indicate their commitment to promote the sustainable

use of natural resources, as well as to “promote trade and investment measures that promote and facilitate access, dissemination and use of best available technologies for clean energy production and use, and for mitigation of and adaptation to climate change.”⁵⁸ These provisions are discussed in further sections of this study. What is useful about such statements for the purposes of ‘windows,’ however, though they focus mainly on cooperation and trade enhancement, is that a future objection to such measures, such as to challenge a new climate law or policy, can be interpreted in light of the commitment to adopt such measures, which is found in Article 275. While no blanket exception or reservation is being provided, the commitment to “promote trade and investment measures” for climate responses demonstrates that the object and purpose of the RTA is not to block the use of trade and investment-related measures to address climate-change issues.

However, the imposition of new environmental restrictions on established investments may result in a dispute complaint against the state for violation of treaties obligations, as occurred in Vattenfall AB v. Germany,⁵⁹ owing to the imposition of restrictions to a coal- fired power plant after it had been issued the operation permit. Although this case ended up in a settlement in 2011, it sets a precedent concerning the limit of the “windows”

according to the fair and equitable treatment as an investment principle.

The above-mentioned agreement provides oth- er specific exceptions. For instance, at Article 174(b), a specific exception is provided in terms of government procurement. This notes that the government procurement clauses of the RTA will not “be construed to prevent a Party from adopting or maintaining measures: […] (b) nec- essary to protect human, animal or plant life or health, including the respective environmental measures; […].”⁶⁰ In essence, the parties ad- opted a general exception in the style of the 1994 GATT Article XX, specifically for procure- ment policies, granting clarity to regulators seeking to understand whether ‘green’ perfor- mance requirements or specifications, or other procurement measures of great importance to

climate-change mitigation and climate finance, might be permitted by their country’s trade agreements.

States have further adopted specific exceptions in RTAs regarding areas where it is possible that trade rules on inter alia sanitary and phytosanitary standards, TBT, intellectual property rights, public procurement, services or investment, might constrain the use of climate=change measures, including those related to promotion of sustainable energy, and climate change induced environmental emergencies.

As one example, Chapter 6 of the 2008 Canada – Peru Free Trade Agreement, addressing TBTs, provides the following specific exception:

“1. Each Party shall ensure that transparency procedures regarding the development of technical regulations and conformity assessment procedures allow interested parties to participate at an early appropriate stage when amendments can still be introduced and comments taken into account, except where urgent problems of safety, health, environmental protection or national security arise or threaten to arise.”⁶¹

Similar exceptions are also found in the 1998 CARICOM-Dominican Republic Free Trade Agreement, where TBT disciplines are agreed in Appendix VI to Annex I; however, flexibility is provided for notification requirements at Article X.3(v). In the same Agreement, Article IV requires parties to use international standards, but is open to exceptions where these would be an ineffective or inappropriate means to fulfil its legitimate objectives, which explicitly include health, environment and sustainable development objectives.⁶²

As another example, Article 150 of the EU- CARIFORUM Economic Partnership Agreement, signed on 15 October 2008, contains a specific exception for genetic resources, traditional knowledge and folklore in the subsection on standards concerning intellectual property rights. Article 150 notably indicates the parties’

commitment to:

“respect, preserve and maintain knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles relevant for the conservation and sustainable use of biological diversity.”⁶³ Article 150 specifically allows the parties to provide legislation and regulations for the protection of biodiversity and the recognition of traditional knowledge as an exception to the general intellectual property clauses contained in the RTA. This exception would likely facilitate domestic measures to harness traditional knowledge for climate-change adaptation, such as regulations to facilitate biodiversity-based medicines should disease vectors change, or new plantings of traditional crops that are known to be drought or flood resistant. It might also prevent intellectual property rights (IPR) disciplines from being used to restrict requirements on transfers of technology for climate mitigation, should these be related to biological materials.⁶⁴

Such recognition, conversely, allows the EC and CARIFORUM parties to require that the origins of genetic resources and biological materials be identified as part of a patenting process, permitting sharing of benefits and, therefore, potentially facilitating broader diffusion of the biological materials. Such biological materials could support climate- change adaptation and mitigation measures, whether applied to traditional medicines for disease control, new crops for climate-smart agriculture or other species for reducing emissions from deforestation and forest degradation (REDD+).

Further such ‘specific exceptions’ of relevance to climate change include, for instance, Article 273 of the EU-Colombia-Peru Trade Agreement, which addresses trade in forest products.⁶⁵ The measures provided in Article 273 notably encourage “the development of systems and mechanisms that allow verification of the legal origin of timber products throughout the marketing chain” and “the strengthening of control mechanisms for timber production, including through independent supervision institutions, in accordance with the legal

framework of each Party.” Article 273 specifically permits and encourages domestic legislation and procedures to promote the sustainable management of forests, which is important for the mitigation of GHGs that cause climate change, including through access to REDD+ climate finance mechanisms.

Article 274 of the EU-Colombia-Peru Trade Agreement addresses trade in fish products, which is a sensitive issue in terms of adaptation to climate change due to the effects of modified weather patterns on fish stocks. The parties

“recognise the need to conserve and manage fish resources in a rational and responsible manner, in order to ensure their sustainability.”

They agree to cooperate under the auspices of regional fisheries management organizations (RFMO) in order to:

... (b) adopt effective tools for the monitoring and control, such as observer schemes, vessel monitoring schemes, transhipment control and port state control, in order to ensure full compliance with applicable conservation measures;

(c) adopt actions to combat illegal, unreported and unregulated (IUU) fishing; to this end, the Parties agree to ensure that vessels flying their flags conduct fishing activities in accordance with rules adopted within the RFMO, and to sanction vessels under their domestic legislation, in case of any violation of the said rules.⁶⁶

In the context of RFMO collaboration, the parties are therefore careful to preserve and even to enhance their capacity to regulate the sustainable use of fish stocks. This flexibility could be very important for efforts to secure sustainable development of fisheries as a climate- change adaptation strategy or to promote marine conservation. As climate change affects marine weather systems, ocean acidification and temperatures, altering migration patterns, the locations of breeding grounds and other factors, such measures may be essential to prevent climate change from threatening both marine ecosystems and human livelihoods.

5.2 Regulating Conflicts between RTAs and Climate/Energy Accords

States can also include general interpretive statements in RTAs to guide areas where trade rules could otherwise potentially constrain the use of measures agreed in other international (or regional) agreements. States sometimes agree within multilateral environmental agreements (MEAs) to specific trade obligations in order to achieve sustainable development objectives. For example, the Montreal Protocol contains measures restricting trade with non- parties to the protocol in goods that contain or were produced using prohibited ozone- depleting substances.⁶⁷ The mechanisms of interaction between MEAs and WTO or RTA trade obligations are far from clear.⁶⁸ Clarification of these interactions within the RTAs themselves is important to the emergence of a coordinated international sustainable development law framework.

Article 13.5 of the EU-Korea Free Trade Agreement explicitly addresses the relationship of the RTA with MEAs and with respect to climate change.⁶⁹ In a more comprehensive fashion, in Article 270, the EU-Colombia-Peru Trade Agreement notes that:

1. The Parties recognise the value of international environmental governance and agreements as a response of the international community to global or regional environmental problems and stress the need to enhance the mutual supportiveness between trade and environment. In this context, the Parties shall dialogue and cooperate as appropriate with respect to trade-related environmental issues of mutual interest.⁷⁰

Paragraph 2 of Article 270 then affirms the commitment of the parties to implement into their domestic laws and practice the Kyoto Protocol to the UNFCCC adopted on 11 December 1997, though at paragraph 4, the parties also stipulate that there are limits where there would be arbitrary discrimination or a restriction on trade.

The parties to the EU-Colombia-Peru Trade Agreement were careful to preserve the ability to fulfil their obligations under a variety of MEAs, including the Kyoto Protocol. However, they condition this by the requirement that such measures shall not be applied in such a way as to discriminate between parties or act as a disguised restriction on trade, similar to the ‘chapeau’ in Article XX of the 1994 GATT.

Annex 20-A of Korea-United States Free Trade Agreement (KORUS) includes seven MEAs referred to under Article 20.2. Given that the US is one of the two parties, this list does not include prominent MEAs, such as the UN Convention on Biological Diversity or the UNFCCC. Interestingly, however, Article 20.10.3 of KORUS seeks to address the issue of potential conflicts between KORUS and MEAs in a more general way, stating that parties should balance their obligations under each agreement and that they are not precluded from taking measures pursuant to the MEA provided they are not a disguised restriction on trade.

5.3 Preventing Lower Investment Standards In many RTAs, states are also adopting commitments not to lower health, safety, environmental and related standards to attract foreign investment, in order to prevent a

‘race to the bottom.’⁷¹ These provisions may favour climate-change measures, preventing investment disciplines from inadvertently stifling the adoption of higher standards in response to climate adaptation or mitigation opportunities.

Echoing Chapter 11 of the NAFTA, Section G-14 of the Canada-Chile Free Trade Agreement, signed on 5 December 1996, provides for these exceptions with the caveat that they cannot be waived in the event they cause issues for potential investors.⁷² Insofar as climate-change measures can be construed as health, safety or environmental measures, this RTA would prevent parties from relaxing climate-change measures in order to encourage investment. However, it should be noted that Section G-15 for Energy Regulatory Measures further states that:

Each Party shall seek to ensure that in the application of any energy regulatory measure, energy regulatory bodies within its territory avoid disruption of contractual relationships to the maximum extent practicable, and provide for orderly and equitable implementation appropriate to such measures.⁷³

In many other accords, further guidance is provided for regulators. For instance, in Article 13.7 of the EU – Korea Free Trade Agreement, the parties commit not to use the relaxation of environmental or labour standards as an investment incentive. As a second example of the latter, in 2006, the US signed a comprehensive FTA with Peru. This agreement features a chapter on the environment, which agrees not to weaken or reduce the protections of environmental laws to encourage trade and investment, as mentioned above. It also agrees not to fail to effectively enforce environmental regulations in a manner affecting trade or investment.⁷⁴ Such provisions provide greater clarity to regulators as to whether other provisions of trade treaties might be intended to strike down or weaken new environmental laws or to prevent their enforcement.

Following this trend, other foreign investment regulation instruments, such as

the International Investment Agreements (IIA) and Bilateral Investment Treaties (BIT) started to include similar provisions to prevent lower investment standards. Furthermore, the new version of the US BIT Model⁷⁵ expands obligations in the area of environment committing parties not to waive or derogate from their domestic environmental laws as an encouragement for investment and not to fail to effectively enforce their domestic labour and environmental laws as an encouragement for investment.⁷⁶ Although, these new obligations are still not existent in the general investment treaties landscape, it is expected that the future negotiations between US and BRIC (Brazil, Russia, India and China) countries under this new model will continue to integrate environmental matters in investment regulation.

These mechanisms serve simply as ‘windows’

in trade disciplines, if interpreted to preserve the flexibility of a regulator responding to new challenges, such as climate change, particularly in situations where scientific information is uncertain.⁷⁷ More interesting, perhaps, are the new provisions in RTAs that promote actual cooperation on climate- change issues, or seek to enhance trade and investment liberalisation in the interest of climate adaptation and mitigation responses.

6. ADDRESSING CLIMATE CHANGE COOPERATIVELY THROUGH RTAs

In addition to the general commitments and different types of ‘exceptions’ highlighted in previous sections, the parties to a growing number of RTAs are establishing mechanisms for new and additional climate change-related cooperation strategies. Such cooperation arrangements are being piloted either as separate side agreements, as chapters of the trade treaties or sometimes both. They address diverse forms of collaboration.

6.1 Strengthening Laws to Address Climate Change

In many of the RTAs surveyed, the parties include provisions committing to improve and strengthen laws or their enforcement, including regulations addressing climate change. Such provisions may be included in cooperation chapters of an RTA or its side agreements, as part of an overall commitment to cooperate and strengthen enforcement of environmental laws in general or under the RTA.⁷⁸ Factual report or complaint mechanisms, which provide recourse when it appears that rules are being violated in order to gain trade or investment=related advantages, may also be assisting in this work, especially if accompanied by reliable capacity-building programmes.⁷⁹

Furthermore, RTAs have become more specific, noting that parties will support improved enforcement of MEAs, including the UNFCCC.

One example of the latter is found at Article 287 of the EU - South Korea Free Trade Agreement, which refers to multilateral environmental standards and agreements, noting that:

2. The Parties reaffirm their commitment to effectively implement in their laws and practice the multilateral environmental agreements to which they are parties including: (a) the Montreal Protocol on

Substances that Deplete the Ozone Layer...

(g) the Kyoto Protocol to the United Nations Framework Convention on Climate Change.⁸⁰

Similar provisions are found in the Canada- Chile FTA,⁸¹ the Canada-Costa Rica FTA,⁸² the Canada-Colombia FTA⁸³ and the US-Central America-Dominican Republic FTA,⁸⁴ among others.

Such agreements could be interpreted to reaffirm the parties’ commitments to effectively implement the 1997 Kyoto Protocol and the 1992 UNFCCC, essentially taking into account parties’ international climate-change commitments (as relevant) within the text of the trade treaty. Such provisions could serve both as interpretive ‘windows’ for regulator flexibility, indicating that provisions of the treaty are not intended to undermine new regulations and other measures under the Kyoto Protocol as discussed above, and to open doors for new collaboration for implementation of the Protocol within the context of the trade treaty.

6.2 Promoting Climate Finance Instruments and Carbon Markets

In several leading RTAs, the parties have included specific plans to cooperate in fostering the adoption and utilisation of international or national climate finance instruments. These include commitments to undertake capacity and institution building activities specifically to implement the Clean Development Mechanism (CDM) of the Kyoto Protocol, or REDD+, as well as commitments to assist in developing domestic carbon markets. As one example, the Mexico–

Japan Free Trade Agreement contains a specific provision determining cooperation related to capacity building in order to strengthen the parties’ abilities to implement the CDM:

Article 147 - Cooperation in the Field of Environment